NITI Aayog meet: How HD Kumaraswamy just laid a political trap for Narendra Modi with his 50% farm loan waiver challenge

One of the key highlights of Sunday's NITI Aayog meeting was the rising chorus for a Centre-sponsored farm loan waiver.

That demand came from at least two major states -- Karnataka and Punjab -- where chief ministers sought Prime Minister Narendra Modi’s intervention to make the Centre a part of their loan waiver programmes.

In the case of Karnataka, the newly appointed chief minister, H D Kumaraswamy made a pitch that the Centre should foot 50 percent of the bill to execute the farm loan waiver programme announced by the state government as part of its campaign promise. Punjab’s chief minister, Amrinder Singh went a step further asking Modi to set up a committee of the Centre and the states to prepare a roadmap for a 'National Debt Waiver Scheme'.

Till now, the Modi government has ruled out the idea of a Centre-sponsored farm loan waiver. Union finance minister Arun Jaitley has said more than once that the union government isn’t ready for a farm loan waiver programme and that states will have to bear the burden should they choose to go for it.

Narendra Modi shakes hands with Karnataka CM HD Kumaraswamy during governing council meeting of NITI Aayog, in New Delhi on Sunday. PTI

But, that scenario could change in the final year of this NDA government if a) monsoons fail this year b) Congress-led opposition parties step-up their street fight against the Modi-government, painting it as anti-farmer, citing the centre’s continuing reluctance to take part in loan waiver programmes.

Clearly, the two Congress-ruled states—Karnataka and Punjab – do not have the wherewithal to implement loan waivers on their own. Kumaraswamy is caught in a big trap -- he committed to the loan waiver within 15 days of coming to power even before finding the means to execute the promise.

The same would have happened to B S Yedurappa as well, had he retained power at the end of numbers-game.

Kumaraswamy will be courting big political trouble if he fails to walk the talk. The most likely scenario, in that case, would be Kumaraswamy passing on the blame to the Centre for not extending help. The idea of pitching his case in the NITI Aayog meeting could have been nothing but this.

The Karnataka CM will then argue that despite the state government’s willingness to implement the farm loan waiver, the BJP-government at the centre is turning its face away from the proposal for political reasons. This will cost the BJP in a big way in the 2019 polls in an agriculture-heavy state.

Now, if Modi concedes to Kumaraswamy’s demand by agreeing to be part of the Karnataka loan waiver, he will have to do the same with the other states making a similar pitch. The Centre may have to even roll out a nationwide loan waiver programme, much like the one P Chidambaram announced in 2008.

That will be a disastrous idea for the government, especially if it is serious about keeping to the committed fiscal deficit roadmap (to 3.2 percent - 3.3 percent this fiscal year).

Already, the Centre has been caught off-guard on the fuel price issue, which is also presenting a political deadlock for the Modi-government in an election year. Rating agency, Moody’s has cautioned that every one-rupee cut in petrol and diesel rates will result in a Rs13,000 crore loss to the state exchequer and will, thus, impact the fiscal deficit badly.

The problem is that the BJP doesn’t have too many points to defend and rule out the idea of farm loan waivers outright because one of the biggest supporters of loan waivers was none other than Modi himself. And a few BJP-ruled states have already rolled out large-scale loan waivers (Uttar Pradesh and Maharashtra for example).

Empirical evidence has showed time and again that loan waivers have hardly helped the needy farmer improve his/her situation, beyond temporary relief. But, this has evolved to become a political tool too good for any politician to reject to lure ill-informed, illiterate farmers to polling booths.

Recently, Kumaraswamy drew political mileage by retorting with a jibe to Modi’s fitness challenge on twitter; but the Prime Minister will find it even tougher to respond to Kumaraswamy’s loan waiver challenge

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